Food & Beverage Training

1. Food & Beverage Training Prepared for Winn Technology October 24, 2008 • Scott Pugmire • Sr. Vertical Industry Manager

2. Purpose of this Presentation • To learn how to gather information from a food or beverage (F&B) manufacturer, distributor, or service company in order for the next step in the sales cycle to be well prepared (i.e. Sage lead distribution, partner follow-up) • Understand their pains for ROI • Have them feel comfortable that you understand what they do

3. A Little Industry Background

4. Key Concepts • Process Manufacturing – blending of ingredients “goop” vs. assembly of “widgets” (aka discrete manufacturing) • F&B manufacturing has complex requirements and they are getting more complex every day. • Complex requirements require complex and flexible solutions. • Very few ERP solutions for the SMB market fulfill the requirements of F&B manufacturers. Many F&B manufacturers are on “home-grown” applications.

5. Food & Beverage Sub-Verticals

6. Food & Beverage Issues • Regulatory / Food Safety • Bioterrorism Act • HACCP • ISO 22000 • cGMP • Kosher / Halal standards

7. Food & Beverage Issues • Process manufacturing capability is essential for manufacturers where formulas and recipes replace bills of materials and inconsistent raw products must be converted into consistent quality output • Recipe Management • Quality Control • Catch Weight Management - parallel inventory accounting of varying weights from piece to piece, either due to biological variations or because of weight loss during storage • Strict federal regulatory requirements must be adhered to by both manufacturers and distributors. • Inventory Management. • Vendor/ Raw Item Traceability. • Product Labeling Requirements • Bio-Terrorism Act Compliance • Special inventory handling via refrigerated or other means applied to warehousing and logistics to compensate for inventory shelf life limitations

8. What do these products have in common?

9. What you may not have heard… • LiveSmart Weight Management Chicken and Brown Rice Recall(April 20, 2007) • FDA Seizes All Medical Products From N.J. Device Manufacturer for Significant Manufacturing Violations(April 17, 2007) • Harry & David Expands Its Nationwide Allergy Alert for Undeclared Nut Allergens in Candies(April 13, 2007) • Menu Foods Voluntarily Recalls Additional Pet Food made with ChemNutra Wheat Gluten(April 10, 2007) • ChemNutra Announces Nationwide Wheat Gluten Recall(April 3, 2007)

10. Food & Beverage Issues - General • Expiration/freshness dates of ingredients and finished goods • Dynamic / fast-paced manufacturing environments • Material handling can be very manual • Ingredients can have varying attributes from lot to lot in some industries • Rebate and promotion programs for distributors • Quality control is very important • Production scheduling by attribute (i.e. allergen, color, etc)

11. Food & Beverage Opportunities • Expiration/freshness – Do you think F&B mfg is going overseas? I doubt it • Dynamic / fast-paced – They need an ERP designed specifically for them; work arounds in a discrete system don’t work. • Manual material handling – O2 Warehouse automation was made with Smart- CodeTM Technology. • Varying attributes – O2 lot attribute functionality • Rebate and promotion – EVS and Nextec to deliver solution soon • Quality control – O2 has a robust, integrated QC module

12. The Marketing “Silver Bullet” • Unfortunately there isn’t one! • Understand the industry: • Needs by sub-vertical • The solution that O2 provides • Persistence – don’t quit • EVS is working for you: • Success stories • Features / functionality • Complimentary products • “National View” of requirements

13. Must Read List • http://www.praxiom.com/22000.htm - ISO 22000 • http://www.expeditors.com/Services/FDABio.asp - Bioterrorism Act • http://www.cfsan.fda.gov/~dms/alrgact.html - Food Allergen Labeling and Consumer Protection Act • http://www.foodquality.com/mag/03222005/fq_03222006_IL2.html

14. Prospect Questions

15. Key Concepts • An ERP that works the way they do. Round peg – Round hole • Split Bill of Materials – Separating Goop from packaging • Fully integrating all departments – typically QC (quality control) and formula management are left out.

16. F & B: 5 Leading Questions • How do you determine what to make and when to make it? • How do you manage recipes/formulas? • Tell me about your manufacturing process • Describe your quality control processes • Describe your regulatory requirements

17. F&B: Question 1 Drill-Down How do you determine what to make and when to make it? • What to make = how is demand determined… • sales forecast, open orders, transfers to other locations • When to make = how do they plan production; • MRP, infinite scheduling; finite scheduling, scheduling based on attributes (allergen, color, type, etc.). • Do they have to manage expiration dates • When they make a batch, do they have multiple finished goods? Co-products and by-products – explain the concept of split BOM • Schedule by the formula, multiple finished goods can be produced

18. F&B: Question 2 Drill-Down How do you manage recipes/formulas? • Most SMB-sized companies keep formulas in Excel • Issues: • Security; loss, backup, and theft • Costing – how do they know how much the formula will cost? • What happens when they want to substitute an ingredient in all formulas • How do you indicate what QC tests to take on the formula • How do you keep revision history of changes

19. F&B: Question 3 Drill-Down Tell me about your overall manufacturing processes that you haven’t covered already • Should uncover any specific or peculiar techniques that they employ to transform raw goods into finished product. • May uncover some potential pain points in their processes • May be able to determine if there is something special that they do that their competitors don’t. (These will be critical factors to include in the partner’s final solution offering)

20. F&B: Question 4 Drill-Down Describe your quality control processes • Incoming materials • Manufactured materials • How to determine what to test • What test to do • Outside process (micro testing) • HACCP Procedures(pronounced “hassip”) • Metal detector • ISO 22000

21. F&B: Question 5 Drill-Down Describe your regulatory requirements • Describe your procedures to be compliant with the Bioterrorism Act • Do you have to produce nutritional labels for your products? If so, how do you currently do that? • If they deal with allergens, how do they manage allergens and avoid cross contamination of products?

22. Thank You Q & A